How Data and Social Pressure Can Reduce Home Energy Use

With the relationship between utilities and their customers changing in unprecedented ways, new companies are deploying vast amounts of data and social psychology techniques to try to persuade people to use less electricity in their homes.

Visit the website of Opower and your eye will be drawn to a counter in the corner, its digits ticking ever higher. The counter represents energy that the company says its customers have saved after it provided them data on electricity usage and employed behavioral science to change their consumption patterns. As of this writing, the counter is climbing past 1.62 billion kilowatt-hours.

Virginia-based Opower is just one of a growing number of so-called electricity consumer engagement companies around the U.S. that have sprung up in recent years with the aim of helping customers reduce their electricity use, primarily by analyzing their current consumption and finding the easy fixes. These companies are mixing in data from the rapid deployment of smart meters with behavioral science to try and answer a key question: How can we get people to care? The central idea is that by showing people how much electricity they use, when they use it, and what their neighbors and peers use, consumers can be driven to change.

These companies, which also include firms such as Colorado-based Tendril and St. Louis-based Aclara, are partnering with utilities nationally and internationally to reduce both utility and consumer costs, and hopefully to plug an efficiency hole that many people don’t even know is there.

Studies suggest that a big chunk of energy that enters a house ends up being wasted.

The potential, by some accounts, is substantial. Opower’s kilowatt-hour counter may look big, but U.S. residential customers used 1.4 trillion kilowatt-hours in 2011 alone. (Opower’s counter represents its customers’ electricity savings over the firm’s five-year lifetime.) Studies have suggested that a big chunk of energy — as much as 20 percent — that enters a house ends up wasted. The companies involved in these new efforts say customers who pay attention to their data and use their software products save from one to ten percent on their electricity bills. With millions of customers already reached through utility partnerships, and tens of millions more as potential customers, such efforts could substantially reduce electricity consumption in the U.S.

It isn’t just energy savings driving the push for consumer engagement and data use in the electricity market. The fundamental nature of our electricity system is shifting in ways that are making it necessary for utilities to engage with customers, says Emma Ritch, a senior smart grid analyst at Greentech Media. These changes include the move by consumers to produce electricity for the grid with household solar power.

The U.S. government has gotten on board, with the launch in early 2012 of the Green Button initiative from the Department of Energy. Utilities that sign on to Green Button provide a simple way for customers to download personalized energy usage data from the utility web site. The first two waves of utility partners will cover 27 million customers, with more on the way.

Green Button is a generalized example of the trend toward providing consumers with far more detailed and informative electricity bills. When utilities around the country partner with companies such as Opower or Tendril, they can send consumers home energy use reports or audits that give a far clearer picture than a standard bill. These home energy reports can compare usage amounts to other households nearby and, if smart meters have been deployed in a given area, can offer detailed opportunities for improvement — when to use appliances, better control of thermostats, and so on.

Smart meters can let homeowners see a remarkably detailed picture of their home energy use.

Deployment of smart meters — which monitor detailed usage of electricity and allow two-way communication with a utility — is continuing around the country, bringing those opportunities to more and more customers. Chuang says his firm’s latest forecast puts smart meter penetration at 32 percent of U.S. households by the end of this year, and approaching 55 percent by 2016. Another forecast, by Greentech Media, sees even deeper penetration, to 62 million smart meters out of 145 million U.S. meters by the end of 2012.

Smart meters can let homeowners see a remarkably detailed picture of home energy use, from which appliances are using a lot of power to what times of day are the most expensive to use electricity. Smart appliances, much fewer of which are yet in homes, can also connect to these systems and allow, say, a dishwasher to run at 3 a.m., when power demand and prices are low.

But even without smart meter data, companies such as Opower have learned that comparing a customer’s electricity use with neighbors is an effective way to spur action.

“Here’s the really interesting thing that we found: the behavioral and social motivators are stronger than data,” says Ivo Steklac, the chief sales and strategy officer at Tendril. “What we’ve discovered is that while its great to have smart metering and be able to provide real-time data to you and your home, that is not necessary.”

Instead, what’s necessary is persuading people that there is a crowd to join. Noted psychologist Robert Cialdini, who works with Opower on behavioral science, once ran a famous experiment with hotel towels. Telling guests that reusing towels was good for the environment did almost nothing, but when a placard in the bathroom suggested that most of the hotel visitors reused them, such usage went up 30 percent. It works basically the same way with electricity: If your bill suggests that everyone on your block is using less than you, you will strive to catch up.

Comparing a customer’s electricity use with neighbors is an effective way to spur action.

In a recent webinar, Opower’s blog editor, Barry Fischer, cited a study showing that of various possibilities, peer pressure was the most effective method of lowering electricity usage. Knowing that your neighbor uses less than you appears to be a stronger motivator than environmental concerns, or even the promise of money saved. Opower leverages this in its home energy reports, with comparisons of a customer’s electricity usage to all neighbors, as well as “efficient neighbors.”

“By taking that away from it being just a relationship between the utility and the customer and making it a relationship between the customers, they’re seeing a lot of success,” says Ritch of Greentech Media.

Indeed, these companies are starting to see results. Opower says its services save customers an average of 1.5 to 3.5 percent on their electricity bills. Tendril cites similar numbers, though it says some customers can experience savings of more than 10 percent. On an individual level, 2 to 3 percent off a $100 monthly bill is still only a few dollars. But viewed through a more global lens, it adds up. Those 1.6 billion kilowatt-hours aren’t trivial when it comes to carbon dioxide emissions; Opower claims almost 2.5 billion pounds of CO2 emissions abated, in addition to a total of $180 million saved on electricity bills.

There are also benefits for the grid. “Even small reductions in peak electricity demand on hot days… can have major economic and operational benefits for the stability of the power grid,” Fischer said.

‘Our basic mission is to change the way the world uses energy,’ says one company official.

Opower, Tendril, Aclara, and many other such companies sell their services to utilities around the country, and the utilities then offer the engagement companies’ services to the ratepayers. Utilities can have huge customer bases; Opower reaches 15 million customers across 75 utilities in six countries, including Australia and the U.K. Tendril says 1.5 million customers are already using its services and 50 million more potentially have access to its software. Aclara, which focuses on smart metering combined with consumer engagement software, says it reaches close to 20 million customers.

Still, the hard part is getting consumers to care enough to participate. Those tens of millions of customers only have access to the data and software; it doesn’t mean they’re using it just yet.

Says Chuang, “How do we convince the general public, which for the most part is energy-unaware, to participate?” He cited numbers from one utility participating in the Green Button program, San Diego Gas & Electric: It claims about 10,000 users have downloaded its home energy data, which doesn’t sound bad until you realize the utility has 3.4 million customers and 1.4 million separate meters.

“The question is, how do we convince the 99.9 percent-plus people who don’t care to participate?” Chuang says. “I think it’s an uphill battle.” He adds that as long as electricity remains relatively cheap, with a kilowatt-hour costing about 10 cents, making a big dent with these techniques will be difficult. “At the end of the day,” says Chuang, “the answer of how to encourage actual consumer adoption might be an answer that most consumers don’t like: that we need to raise electricity prices.”

One could argue that utilities would be better served putting money into other efficiency improvements, such as offering home retrofit rebates. But Ritch and others cite the major benefit of more deeply engaging with customers at this transformative period in the life of the grid.

“The energy profile five years from now of a typical residential consumer is not the same as it was maybe 10 years ago,” says Ritch. “The electric grid used to be a one-directional flow of power, and now we have residential consumers with solar panels on their roofs.”

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When such panels produce more electricity than is necessary in a home, there needs to be a way to send that power to the grid. Or another example: A washer/dryer or air conditioner used to be the biggest power draw in a house, but now consumers may need to charge an electric vehicle. If people in five households in a cul de sac all come home and charge that EV at the same time, it could blow a transformer.

In other words, the system has become strikingly more dynamic, and the old relationship won’t stand up to that change. “Utilities have no choice but to engage consumers because of the changing needs of the electric grid,” says Ritch.

And though adoption may be slow, analysts do see a fundamental change coming in how — or maybe how much — the consumer thinks about electricity. One oft-cited study by Accenture suggests the average person interacts with a utility company for six to nine minutes in an entire year; Tendril says one-third of users of one of their software programs log on once every few days. The paradigm is shifting, and the companies involved aren’t modest about their goals. Says Tendril’s Steklac: “[Our] basic mission is to change the way the world uses energy.”

Dave Levitan is a freelance journalist based in Philadelphia who writes about energy, the environment, and health. His articles have been published by Reuters, SolveClimate, IEEE Spectrum, and Psychology Today. More about Dave Levitan →